• European bourses are under modest pressure as benchmarks gradually dip in catalyst thin trade; US futures near unchanged
• DXY is incrementally softer with GBP the standout outperformer post UK GDP
• Given the above, Gilts lag though EGBs are also lower while USTs remain afloat pre-data
• Crude benchmarks are near unchanged after Thursday’s subdued settlement, XAU bid
• Looking ahead, highlights include US PPI & UoM (Prelim).

EUROPEAN TRADE

EQUITIES

• European bourses are under modest pressure as benchmarks gradually dip in catalyst thin trade, Euro Stoxx 50 -0.7%
• Sectors are mainly in the red with Telecoms and Financial Services slightly firmer, the former aided by a source report re. Telecom Italia.
• Stateside, futures are near the unchanged mark with drivers limited pre-PPI/UoM; ES +0.1%.
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• Click here and here for a recap of the main European equity updates.

FX

• DXY trades modestly softer intraday but has reclaimed the 102.50 mark in 102.44-102.66 boundaries.
• Sterling is the standout G10 outperformer following an upward surprise to UK GDP, Cable above 1.27 at best while EUR/GBP slipped beneath 0.8650.
• EUR unreactive to incremental revisions to regional data with the single currency failing to benefit from modest USD pressure as GBP strength works to offset this.
• JPY and CHF diverge slightly but remain in very close proximity to the unchanged mark, USD/JPY at 144.50 and EUR/CHF near 0.9630.
• PBoC set USD/CNY mid-point at 7.1587 vs exp. 7.2193 (prev. 7.1576)
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Currently, fixed benchmarks are under modest pressure with the price action a continuation of the downside seen over the last few sessions and has EGBs on track to end the week at the midpoint of its range
• Gilts are in-fitting but today’s magnitude is more pronounced while USTs buck the trend and are little changed ahead of PPI.
• Post-GDP market pricing for the BoE saw a modest hawkish adjustment and now ascribes around a 70% chance to a 25bp hike in September, pricing which remains more-dovish than the SONIA strip; currently, the September contract has a 25bp hike fully priced
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COMMODITIES

• WTI Sep and Brent Oct futures are flat in early European trade with news flow also on the quiet side this morning, after settling lower yesterday by USD 1.58/bbl and USD 1.15/bbl respectively.
• WTI trades on either side of USD 83/bbl and Brent on either side of 86.50/bbl, with the contracts looking for clear direction amidst summer conditions.
• Dutch TTF prices have receded from highs on the front-month contract, which trades with losses of around 1% at the time of writing, but looking further ahead, the Nov and Dec contracts remain firm.
• Spot gold trades with a positive bias as the DXY remains subdued, with the yellow metal around the USD 1,915/oz mark in a narrow USD 10/oz range; base metals subdued.
• IEA maintains 2023 demand growth forecast and lowers its 2024 forecast by 150k BPD; says global oil demand hit record and prices may climb
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NOTABLE US HEADLINES

• Fed's Harker (voter) said the Fed is making progress in the inflation fight, according to Reuters.
• US moderate Democratic Senator Manchin weighs leaving the Democratic party, according to WSJ.
• Hawaii's Governor said the wildfire death toll is to increase 'very significantly', according to AFP News Agency.
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• ECB's Lane says that interest rates will likely settle at low levels, but not super-low when the current inflation shock is over. Part of a podcast recorded in July

DATA RECAP

• UK GDP Estimate MM (Jun) 0.5% vs. Exp. 0.20% (Prev. -0.10%); 3M/3M 0.2% vs. Exp. 0.00% (Prev. 0.00%)
• UK GDP Prelim. QQ (Q2 2023) 0.2% vs Exp. 0.0% (Prev. 0.1%); YY (Q2 2023) 0.4% vs. Exp. 0.2% (Prev. 0.2%)

GEOPOLITICS

• US Secretary of State Blinken said the release of Americans in Iran from prison is a positive step but this is just the beginning of the process and more work is to be done to bring the Americans in Iran home. Blinken added that Iran will not receive any sanctions relief and that the US will continue to enforce all of its Iran sanctions.
• China took measures against a Chinese national accused of spying for the CIA, according to state TV.
• Airspace over Moscow's Vnukovo airport closed, according to Tass; Al Arabiya writes airspace closed "after monitoring a march heading towards the capital". Airspace has since reopened, with Russia confirming a drone was shotdown.
• China Maritime Authority says China to conduct military exercise around the waters in East China Sea between Aug 12-14th.

CRYPTO

• Bitcoin is in proximity to the unchanged mark with drivers thin and the session's range limited by extension ahead of US data impulses, BTC in a USD 29.3-29.47k boundary.

APAC TRADE

• APAC stocks traded mostly lower after the post-CPI dovish unwinding seen stateside and amid Chinese developer concerns, with trade also hampered by thinned conditions with Japanese participants away for Mountain Day.
• ASX 200 was lackluster with the upside in consumer stocks negated by the losses in the commodity-related sectors, while RBA Governor Lowe’s testimony provided very little in the way of fresh insight in which he reiterated that further tightening may be required.
• Hang Seng and Shanghai Comp declined with developers pressured including Country Garden after it flagged a loss of up to CNY 55bln for H1 and hired CICC for debt restructuring. Furthermore, shares in Fantasia Holdings dropped more than 50% on resumption of trade after being halted since March last year, while participants await details from the securities regulator’s emergency meeting with developers and financial institutions. Conversely, Alibaba, China Mobile and Li Ning were among the best performers in Hong Kong following their results including the beat on top and bottom lines by China’s e-commerce giant.

NOTABLE ASIA-PAC HEADLINES

• China is to shift USD 139bln of troubled local government financing vehicle debt to provinces under a new program that aims to support financial stability and named 12 cities and provinces as high-risk, according to Bloomberg.
• US President Biden said China is a "ticking time bomb" because of its economic challenges and that the country is in trouble because of weak growth, according to Reuters.
• China is to pause plans to build a new embassy in London, according to a Reuters source.
• New Zealand national intelligence agency said competition between countries is becoming more acute and some countries are seeking advantage through subversive and dishonest means such as espionage and foreign interference against New Zealand. Furthermore, it is aware of ongoing activity against New Zealand and near regions linked to China's intelligence services and said this is a complex intelligence concern.
• RBA Governor Lowe said things are moving in the right direction but it is too early to declare victory on inflation and the board remains resolute in its determination to return inflation to the 2%-3% target range. Lowe added it is possible that some further tightening of monetary policy will be required to ensure that inflation returns to target within a reasonable timeframe and whether or not this is the case will depend upon the data and the Board’s evolving assessment of the outlook and risks. Furthermore, Lowe said rates are restrictive so they are in a calibration stage with policy, while the worst is over for inflation and they are in a reasonable place to return it to the target.

DATA RECAP

• Singapore GDP QQ (Q2 F) 0.1% vs Exp. 0.3% (Prev. -0.4%); YY (Q2 F) 0.5% vs Exp. 0.7% (Prev. 0.4%)
• New Zealand Manufacturing PMI (Jul) 46.3 (Prev. 47.5)
• New Zealand Food Price Index MM (Jul) -0.5% (Prev. 1.6%)
• China July: M2 Money Supply: 10.7% YY (exp. 11.0%), Aggregate Financing: 528bln (exp. 1.1tln), New Yuan Loans: 3466bln (exp. 780bln), lowest since 2009